Venture Capital Trusts (VCTs) invest £506 million in small private companies and AIM companies in 2023, marking a 28% decrease from the previous year
In the 2023 calendar year, Venture Capital Trusts (VCTs) invested £506 million in new and follow-on investments in small private companies and companies listed on the Alternative Investment Market (AIM). This represents a 28% decline from the previous year’s investment of £705 million. The figures were reported by the Association of Investment Companies (AIC) based on data from the Pitchbook European Venture Report.
Venture capital industry in the UK and Ireland experiences a 46% decline in investment in 2023
According to the Pitchbook European Venture Report, the wider venture capital industry in the UK and Ireland saw a significant decline in investment in 2023. Deal activity dropped by 46% to €19.4 billion from €35.6 billion in the previous year. This decline had a notable impact on VCT investments, with the total investment amount in private companies and AIM companies decreasing to £506 million in 2023 from £705 million in 2022.
VCT investments in 2023 mainly focused on private companies, with £454 million invested in 251 companies
Out of the total VCT investments in 2023, £454 million was directed towards 251 private companies, while £52 million went to 24 AIM companies. This signifies a shift towards supporting small private companies and highlights the role of VCTs in providing vital support for growth ambitions. In comparison, VCTs invested £658 million in 341 private companies and £48 million in 22 AIM companies in 2022.
VCT managers express optimism for investment pipeline in 2024
Industry experts and VCT managers are optimistic about investment opportunities in the coming year. They note an improvement in the quality of investment pipelines and an increase in economic activity. Despite the challenging economic conditions experienced in 2023, VCT managers believe that the mid- to long-term potential of many excellent companies remains strong. They also highlight the advantages of VCT investments, such as attractive tax benefits and good long-term performance.
Pembroke VCT sees an improvement in investment pipeline, invests in B2B software company Transreport
Pembroke VCT, a venture capital trust, has witnessed an improvement in the quality of its investment pipeline in the last quarter of 2023 and continuing into the first quarter of 2024. The company recently invested in B2B software company Transreport, which specializes in accessibility technology for older and disabled individuals. This investment reflects the increasing confidence in economic indicators and highlights the long-term potential of various companies in 2024.
Maven Capital Partners and Octopus Titan VCTs express positive outlook for investment opportunities in 2024
Maven Capital Partners and Octopus Titan VCTs also share an optimistic outlook for investment opportunities in the coming year. Both venture capital firms have observed an increase in activity and economic conditions that have improved since the second half of 2023. They believe that challenging economic periods present excellent investment opportunities, driven by talent availability and reduced competition. They anticipate the creation of the next generation of technology-enabled companies and the potential for exciting opportunities throughout 2024.
Gresham House and YFM Private Equity report strong deal flow and a significant pipeline of opportunities in 2024
Gresham House, which manages the Baronsmead VCTs and advises the Mobeus VCTs, notes that despite the challenging macroeconomic environment, they have maintained a strong deal flow. The company completed eight investments in the last quarter alone, totaling £22.4 million. They express their commitment to supporting early-stage companies in their growth journey and highlight the compelling opportunities available for investors across various sectors.
YFM Private Equity, which manages the British Smaller Companies VCTs, reports a consistent increase in demand for equity capital throughout the year. They anticipate this trend to continue and emphasize the strong pipeline of opportunities they have for the year 2024.
Mercia Ventures looks forward to supporting innovative companies in 2024
Mercia Ventures, which manages the Northern VCTs, remains optimistic about supporting new and existing innovative companies despite economic uncertainties. The company expresses confidence in its ability to identify and invest in promising opportunities, as it has a healthy pipeline of new investments for the year 2024.
Analyst comment
The news is mixed, with a decline in VCT investments and venture capital industry activity in 2023. However, there is optimism for the investment pipeline in 2024, with VCT managers and firms expressing positive outlooks and strong deal flow. The market may experience a recovery in 2024 with increased economic activity and a focus on innovative companies.
